pebblewriter

Tag: performance

  • Fed Minutes: How Hawkish Are They?

    Markets tend to moves higher on Fed minutes days, even if the news isn’t all that positive.  It’s all about convincing investors that the FOMC has their best interests at heart — that all they’re worried about is making sure that stocks continue to rally.

    Today’s session is slightly complicated, then, by ADP employment which came in much higher than expected: 263K versus 175K.  Theoretically, this puts pressure on the FOMC to raise rates and/or trim their balance sheet faster than anticipated.  But, central banks have many tools at their disposal to ensure that the complication doesn’t become a problem.

    S&P 500 futures are up 6.5 points, but right to Fib resistance.  

    Can the Fed spin a hawkish set of minutes into something positive for stocks?

    continued for members… (more…)

  • Gold: Following the Yellow Brick Road

    I’m not a gold bug.  I’ve always thought the price is pretty heavily manipulated (long before it hit the headlines) and I guess I’ve avoided it on principle.  Looking back at my forecasts over the past year or so, that was probably a mistake.

    Since our December 14, 2015 forecast, GC has gained about 19% — not shabby.  However, if one heeded the forecasts offered with each subsequent update, the net return would have been over 80%.

    I’ve said many times, lately, that forecasting stocks has become a lot tougher than forecasting the various drivers of stock prices.  In the case of gold, it is obviously affected by the value of the US dollar, which is an important component of USDJPY — a key driver of equity algos.

    Thus, GC — like USDJPY, WTI and VIX — is one of those things that’s been relatively easy to forecast even though I’ve devoted only the occasional hour or two to its study.  Before we touch on today’s forecast, let’s take a look at the past year’s periodic forecasts.The numbers in the above chart correspond to the posts below.

    1. Dec 14, 2015 (GC: 1060):
      “If DX plunges further, as I expect it will, GC’s 4th bounce could be a doozy: 1150-1180 for starters, and 1286 after that.”  GC reached 1180 by Feb 8, topped out at 1287.80 on Mar 11.
    2. Mar 4, 2016 (GC: 1280):
      “I’d be very cautious in chasing GC at this point…acts like it’s reversing between here and 1286…take the gains…it could easily backtest the .618 at 1207.60.”  GC reached 1286 the next week, then reversed to backtest 1206.
    3. April 8, 2016 (GC: 1240):
      “If [gold] breaks above the purple midline [at 1270] then 1379-1380 is the next logical target…”   Gold reached 1377.50 three months later.
    4. July 7, 2016 (GC: 1361):
      “Our target range from April 8 was 1379-1380.  Yesterday’s 1377.50 was probably close enough.  If it can’t make new highs today, the next stop is the neckline at 1307..”  GC, which peaked at 1377.50 on Jul 6, dropped 5% to 1310 over the next 2 weeks.
    5. Aug 26, 2016 (GC: 1324):
      “…[there’s a] huge IH&S Pattern, the neckline of which is the former high at 1307ish.  If TPTB are serious about discrediting GC anytime soon it’ll involve getting it back below that [1307] support.”  GC tumbled to 1307, testing it three times before breaking down to 1243 on Oct 7.
    6. Oct 7, 2016 (GC: 1254): “…GC tagged its SMA200 and the bottom of a pretty good looking channel earlier — usually good for a bounce.”  GC bottomed the next day at 1243, bounced for a month, reached 1339 on Nov 9.
    7. Nov 14, 2016 (GC: 1227): …GC’s channel finally broke down two days ago and has potential to 1083 — a 12% drop from here.  What better way to finish the year out?  GC plunged 103 (8.4%) over the next month.
    8. Dec 5, 2016 (GC: 1175): If the .618 [1172.40] breaks down, then the next support isn’t until the red TL at 1130, followed by the .886 at 1083.50… GC reached 1130 on Dec 15.
    9. Dec 15, 2016 (GC: 1129): “GC is currently testing an important internal TL of support… a potentially important test…that could produce a bounce to the purple midline [at 1230] or the SMA200 — currently at 1278.”  GC reached the SMA200 at 1264.60 on Feb 27.

    After tagging its 200-day average in February, gold tumbled about 67, back below a key channel midline.  But, it is right back in the swing of things, having nearly reached the SMA200 a second time just yesterday.

    With all the discussion about what the Fed will or won’t do for the rest of the year, what’s next?

    continued for members… (more…)

  • April 2013 Results

    April was the most grueling month I’ve experienced since starting pebblewriter.com. The month started only 6 points below the all-time high of 1576 and ended at the trend line connecting that high with the year 2000 high of 1552. Nearly every session begged the question: will SPX make a new all-time high?

    Seventeen of the 22 sessions in entire month saw trading within 10 points of at least one of the lines. What’s more, the average daily range was 16.5 points. About 60% of the sessions involved a change in direction. If it had been a basketball game, they’d have carried both teams off the court after reaching 180-179 in quadruple overtime.

    It was a blur of whipsaw days, sleepless nights and an almost embarrassing number of trades — about three per day. We had many sizable gains as well as our single biggest loss since inception: 1.59%. By the time all the dust settled, we were up 14.45% for the month versus 2.03% for the S&P 500 — our 3rd best month yet.

    LESSONS LEARNED

    All in all, it was a very instructional month — reinforcing some things I’ve been doing and arguing against others.  Two issues I’ve been studying are interim trades and holding positions overnight.

    The overnight ramp jobs and reversals were deadly.  It was only marginally beneficial to maintain a position overnight or over a weekend. And the whipsawing got so bad that I was a little paranoid by the end of the month.  Performance might have benefited from looser stops and going to cash overnight and over weekends.

    There were also days I should have stayed with the trend and ignored the bounces or “interim trades.” On the 18th, for example, I let a short trade run while playing short-term bounces to offset the losses.  By the time I covered the short on the 23rd, my three winning trades of +2.45% offset the 4 losing trades totaling -1.85%.  But, I could have earned 2.5% by simply switching sides when the short signal faltered.

    GOING FORWARD

    As we discussed last month, the trickiest part of Harmonic Patterns is the .886 – 1.000 range (once a Bat Pattern completes, will there be a new high?)  Now that the question of a new high is settled, we should see more directional moves and less chop in the market — reducing day trading and permitting more swing trades.

    The road ahead continues to look bumpy.  Sentiment is lousy as many market participants seem to feel stocks are overpriced, but are leering of abandoning BTFD. Corporate earnings look fine on an EPS basis, but have mostly missed on revenues and outlook.  The economic picture continues to be worrisome, with weakness across the board.

    All eyes will continue to be on the Fed, which seems to hold the market’s future in its hands.

    GLTA.

  • Results: Feb 28, 2013

    The S&P 500 gained about 6% between the last update (Dec 20, 2012) and the Feb 19 highs of 1530.94.   The index gave back half of the gains over the subsequent week, then retraced 88.6% of those losses over the next two sessions for a total move through Feb 28 of about 11%.  Our calls accomplished approximately 19% over the same period.

    December, 2012

    December 2012 wrapped at +9.20%, leaving us with a total return for 2012 (since inception on Mar 22) of 97.99%.1  The S&P 500 was up 2.36% over the same period (excluding dividends) and the average hedge fund earned 7.32%.2

    I had anticipated a significant reversal in mid-December at SPX 1346, and the market accommodated with a 3.3% decline into the year’s end based on an analog that served us very well since April, 2012.

    January 2013

    Even though Congress failed (as expected) to really resolve the fiscal cliff dilemma, the market saw the resolution as “good enough” and pushed higher during the low-volume New Year’s holiday week.

    The next two weeks were spent in harmonic pattern limbo, deliberating whether a double-top or a new high was in the works.  Finally the question was settled by a push past the Sep 2012 highs — right into the next harmonic target range. With only 9 sessions left in the month, there was little time left in which to accomplish much.

    At +4.46%, January was the first month in which our numbers lagged the S&P 500.  I realize that 4.46% is nothing to sneeze at; but, in retrospect, I should have exercised more caution around big news days, used tighter stops and perhaps traded a bit more frequently.

    February 2013

    At +11.43%, February was a much more rewarding month — but, not without its challenges.  Prices fluctuated by 10 or more points in a full two-thirds of the trading sessions.  But, volatility creates trading opportunities, so I took full advantage.

    It seemed at the time that I traded too frequently (33 times, including 14 intra-day trades that added 5.50%.)3  Looking back, however, SPX gained only one point between the Feb 1 close and the Feb 28 close.  In other words, it was the kind of month where day traders are rewarded, and buy-and-hold types should have gone skiing.

    If nothing else, February convinced me that a managed fund could deliver added value for pebblewriter subscribers who have neither the time nor the inclination to sit by their computers waiting for the next trade signal.

    Even for those who do, there is the problem of time lag.  Under the best of circumstances, it can take several minutes to transmit a newly hatched idea — more if charting or explanation are involved.

    By the time a member receives, reads and acts on the information, prices can move appreciably — potentially reducing returns and/or increasing risk.  A fund should, at the very least, eliminate the lag.  I am currently working with advisors and will announce details as soon as possible.

    Summary

    As of Feb 28, we’re up 113.08% since inception for an average monthly return of about 10.05% — on track with our Dec 20 report.  I’ll continue to work on finding the right balance between trade frequency and risk-adjusted returns.

    The road ahead looks no less bumpy.  Will QEn sustain uninterrupted new highs, or will this market — like every one before it — soon reveal its Achilles heel?  Interest rates are on the rise, while a whole host of economic indicators and corporate earnings are flagging.

    Personal income is slumping, employment isn’t much better, the euro zone is officially back in a recession, China is faltering and central banks the world over are racing to devalue their currencies as debt continues to skyrocket.  Where’s the upside in that scenario?

    The day will come when money printing and accounting gimmicks alone won’t be enough to levitate the stock market.  At the end of the day, real profits require that someone, somewhere, buys something.  A bull market that rallies to new highs while ignoring that basic premise is, in my opinion, not long for this world.

    Stay tuned…

     

    Notes:

    1 According to this Barron’s article, only one of the hedge funds tracked by HSBC earned over 40% in 2012; another 7 earned 30% or more. The average fund earned 7.32% and about one third lost money.

    2 Remember, our “performance” is based on a theoretical unleveraged portfolio utilizing only long and short positions in SPX based on the tops and bottoms identified on pebblewriter.com.  Trading expenses are not included.  Your mileage will vary.

    3 Late last year, I began experimenting with leaving a core long or short position in place while placing short-term or intra-day trades.  The jury is still out on the effectiveness of this strategy.

  • The Fund

    A couple of months ago, I mentioned I was looking into starting an investment fund.  I’ve decided to move forward with it.  There are several reasons, but the two main ones are:

    1. FORMAT: using a blog to convey market information that produces consistent results for the average armchair investor is difficult; and,
    2. BUSINESS MODEL: while enormously enjoyable, the amount of work I put into the website is, unfortunately, not proportional to the financial reward.

    THE FORMAT

    As we come up on the one-year anniversary of pebblewriter.com and two-year anniversary of pebblewriter.blogspot.com, I’ve taken a long, hard look at the website’s effectiveness.  What I do is sometimes fairly complicated, which explains why almost half of our members are investment professionals (investment advisors, brokers, etc.)

    The balance are split between pretty serious investors who have the time and energy it takes to learn and implement my techniques, and those who don’t (seriously, who wants their surgeon taking a break during an appendectomy to trade his portfolio?)

    In blogging, it’s tough to write a post that satisfies the needs of all three groups.  Some members want to know how the watch works, while others simply want to know what time it is.  Others, especially those new to the site, just want to be less confused.

    Even when I pen the perfect post, there’s always the issue of getting information out quickly.  Charting already takes a lot of time.  Making the charts presentable and offering even minimal explanation obviously takes even more.  In a fast-moving market, this can affect performance.

    I believe a fund would allow investors of all kinds to benefit the greatest from the research I do. When I make a trade decision, they won’t have to worry about deciphering the information or being available to act on it.  It’ll just happen.

    I’ll continue to offer research for determined do-it-yourself’ers who don’t need quite as much hand-holding — perhaps offering periodic webinars to discuss things in more detail.  And, of course, I will continue to offer specialized services to those professionals who use my technical analysis to augment their own analysis.

    BUSINESS MODEL

    My hope in starting pebblewriter.com was that it would grow enough through word of mouth that I could make some reasonable coin while putting in only 40-50 hours/wk and still have the flexibility to hang with the family, travel, etc.

    Instead, I’m putting in about 70-80 hours/wk and making a little more than I did as a first year associate straight out of B-school.  Old Wall Street chums with the same level of expertise as I do average 10-30X and have a lot more free time.

    I’ve studied some of the other successful web-based investment services, and have come to believe most are really better at marketing than they are forecasting markets.  Frankly, I’m not interested in building a marketing company that offers investment products.  I am very interested, however, in being an excellent forecaster for those investors who value (i.e. are willing to pay for) such services.

    Though most on Wall St would laugh to hear me say it,  it’s not always about money.  About 70 of my friends/co-workers didn’t come home on 9/11 because they were busy chasing money.  We all gotta go…but I’d like it to be in pursuit of something meaningful and enjoyable. I really enjoy the challenge of forecasting markets, and love helping others reach their financial goals.

    But, if I’m going to spend 10-12 hours/day away from my lovely family, I owe it to them to provide something tangible such as, say, a decent college education or the occasional trip to Disneyland.  And, I owe it to subscribers not to burn out.

    THE PLAN

    In 2012 (from inception March 22), pebblewriter.com members who went long SPX when I called bottoms and sold short when I called tops would have earned about 100% on a highly diversified, unleveraged portfolio.  It turns out this was no small feat — more than 2X the best-performing hedge fund’s 2012 return.

    According to Barron’s, only one of the hundreds of hedge funds tracked by HSBC earned over 40% in 2012; only another 7 earned even 30%. The average fund earned 7.32% and about one third actually lost money. The S&P 500 itself earned returned about 16% (including dividends.)

    My plan is to generate high risk-adjusted returns for investors in a hedge fund using the same techniques I use every day on pebblewriter.com to determine tops and bottoms.  But, instead of  writing about them (and trading for my own account) I will go long and short broad equity markets (primarily the S&P 500) and, to a lesser extent, currencies and risk instruments such as VIX.

    The portfolio might occasionally be all or partially long or short, or even all cash.  This would be a slight departure from the website, which generally reflects either 100% long or 100% short. This added flexibility would allow the portfolio to reflect the degree of confidence I have in a particular move.  It would also allow us to move to the sidelines in the event of high-risk situations such as an election or FOMC announcement.  I would use no leverage other than that required to hedge existing positions.

    The fund would be managed by me, but all assets would be held by a third-party custodian such as BNY Mellon or State Street.  Another entity such as Citco or Apex would provide administration and a major accounting firm would provide audited tax returns.  This isn’t the cheapest way to run a hedge fund, but it’s the safest.

    I intend to keep the size of the fund manageable, which to me means no more than $100 million.  The legal stuff is in the works, but the plan is for a private placement for about 100 accredited investors.  The US fund would be domiciled in Delaware, but I’m looking into a master-feeder arrangement with an offshore fund in either the Cayman Islands or BVI for non-US and tax-exempt investors.  About $5 million in capital is already earmarked.

    Minimum investment would mostly likely be $100,000, though there might be a limited number of smaller slots for non-accredited investors.  Fees would be the standard 2/20 hedge fund structure and feature a high-water mark and hurdle rate to be determined.  Liquidity would most likely be quarterly.

    Annual pebblewriter.com members would receive several perks – my way of saying thanks for being an important part of the journey.  First, annual members would get first crack at the 100 subscription slots.  If there are still slots available after annual members have subscribed, I intend to open it up first to other members, then those referred by members, and lastly to outside investors.

    In addition, annual members who invest in the fund would be eligible for a rebate of their unused subscription fee to pebblewriter.com.  So, an annual member who paid $950 one month before investing in the fund would receive $870.83 (11/12 of 950) back in quarterly installments over the course of their first year.  And, subject to the lawyers’ okay, I plan to offer annual members an additional 10% discount on their first year’s total fees.

    It’s hard to say exactly when everything will come together, but I’m shooting for late March/early April.  I can’t offer any more guidance at present, but want to stress that the above perks will be offered to annual members on a first-come, first-served basis.  My goal is that every annual member who desires to participate will have the opportunity.

    But, when the slots are gone, they’re gone.  So, the best way to ensure a spot is to: (1) become an annual member right away; and, (2) act quickly when the offering goes live.  Those current quarterly and semi-annual members who wish to become annual members now may have their current membership extended by one year, and would thus be eligible for the membership rebate and fee discount as described above.

    PEBBLEWRITER.COM

    As for pebblewriter.com itself, I intend to migrate the website and customized services to a more sustainable model that won’t compete with the fund.  This means that the cost of an annual subscription will be raised to $2,500 on March 4 (except for charter members, whose rates are fixed.)

    I understand this represents a steep increase for some, but it is comparable to the annual fee charged to someone making a $100,000 investment in the fund, or a $150,000 investment in the average equity mutual fund.  It will cover the cost of hiring additional administrative support for the website (sign-ups, log-in issues, etc.) that will be necessary once the fund is up and running as well as much-needed enhancements in technology and communications.

    Speaking of running the fund… I plan to run it from Carmel, California where my family and I reside.  An added bonus for fund investors, the Monterey Peninsula is one of the most beautiful places in the States to visit. While checking up on your investments, you can take in the ATT Pebble Beach Pro-Am golf tournament, the Monterey Jazz Festival, the world-famous Monterey Aquarium, or a drive through gorgeous Big Sur.

    Carmel is about a 90-minute drive south of San Jose/San Francisco, but is also served by the Monterey Airport which offers a 7,600 foot runway and several excellent FBO’s as well as direct flights via United, American, US Air and Alaska Air.

    It will help immeasurably to have a good sense of how many US vs non-US members plan to participate in the fund — if and when it is offered. So, look for an email in the next day or two asking for your opinion. In the meantime, please don’t hesitate to contact me, as many of you already have, with any questions about the fund or the website.

    I’m excited about taking this next step, and will continue to do my best to earn the faith you’ve shown by being a part of pebblewriter.com.

    *  *  *  *  *  *  *  * 

    important note:  

    The above is not an offer to sell or a solicitation of any offer to buy any securities. Offers are made only by prospectus or other offering materials. To obtain further information, you must complete our investor questionnaire and meet the suitability standards required by law. The  fund discussed above is strictly in the planning phase, which means it might never be formed nor offered to subscribers. If it is, essential elements might differ significantly from those discussed above.  The information contained on this and every page of pebblewriter.com is subject to our Disclosures and Use Agreement available here.

     

     

     

     

     

     

     

     

     

     

     

  • Charts I’m Watching: Dec 24, 2012

    Strange things have happened around holidays this past year.  Though this is a short day (equity markets close at 1pm EST) it’s best to remain vigilant.  Equity futures have recovered most of their overnight losses, and TPTB would love nothing more than to undo the gains we’ve racked up (since shorting on the 18th) while no one’s looking.

    Keep an eye on the proposed channel for the dollar for any signs of weakness…

    …as well as the EURUSD, which is trying to stage a comeback.  A move through 1.3232 would signal 1.3265 — 1.3238.

    UPDATE:  10:15 AM

    As to SPX, any push beyond 1432.78 carries the risk of a Bat completion up at 1441.27.  Though, there would no doubt be a reaction at the .618 of 1435 first.

    Since the 1432.78 high on Dec 21 stopped just shy of the 1432.82 low the day before, it might mark the completion of a Wave 4 in the first subwave of whatever degree wave down we’re currently in.  Thus, the bulls might attempt to throw this most obvious bearish wave count into disarray by overlapping 1432.82.

    It would then be easier to characterize the 1448-1422 slide as a normal A-B-C corrective wave rather than a bearish impulsive wave.  Regular readers know that I don’t use Elliott Wave for predictive purposes, but it’s good to be aware of what Wavers might be thinking — since breaking through key EW levels will likely get them moving one direction or the other.

    Our bearish case would benefit most by a reversal right here at the midline of the proposed white channel.

    More later.

    UPDATE:  11:45 AM

    SPX just completed a small H&S pattern (below, in purple.)  If it plays out, it will negate a potential IH&S pattern (in yellow).  If the purple pattern plays out, it targets 1417 or so, which is around the bottom of the little white channel that’s tracking pretty well so far.

    If the yellow pattern completes with a return to the dashed yellow line at Friday’s 1432 high, it would target somewhere in the vicinity of the .886 retracement of the 1443-1422 drop at 1441.

    A low-volume, holiday-shortened feel-good day like today would be the perfect time to execute a ramp job.  As discussed above, keep your guard up.

    UPDATE:  1:00 PM

    Things remain on track here at the end of the holiday-shortened equity trading day.  Any fireworks will have to wait until Wednesday.

    BTW, I finally updated the RESULTS PAGE for those who follow such things.  Friday marked the end of the third quarter since the new site went live on Mar 22.  After Dec 31, reports will be based upon calendar quarters.

    Since inception last March, we’re up about 95% as compared to 3.7% for SPX (without dividends.)  I don’t have figures for the same time period for hedge funds, but according to HSBC’s Dec 13 Hedge Fund Weekly [available on Zerohedge.com] the average ytd performance for all equity hedge funds was 5.15%.  The top-performing fund (BTG Pactual’s Distressed Mortgage Fund) returned 39.91%.

    *  *  *  *  *  *  *  *

    POTENTIAL CHANGES:

    A couple of weeks ago, I mentioned I’ve been considering some significant changes to this site.  Although our results have been above-average, I’ve debated whether the current format is the best way of delivering value to members.

    It’s challenging, for instance, to convey information in a way that serves the needs of both long-term investors and day-traders.  It’s also difficult to strike a balance between providing timely trade information to those who don’t require a lot of explanation and educating those who are new to my process.

    Also, from a purely mercenary standpoint, I’d like the site to make financial sense for me and my family.  I realized when I began the site that it would take some time for word to spread.  My goal was that by the end of the year I could cover my nut while putting in only 40-50 hours per week — leaving me enough time to hang out with the family, coach a little basketball, travel some.

    Nine months later, membership has grown to a point where it almost pencils out — but, not quite.  I can’t yet justify hiring a proper web developer and administrative staff to handle membership issues, accounting, loss prevention, so I’m putting in 60-80 hours week on average — which, of course, leaves less time to chart, write and sleep — not to mention my family and other business interests.

    It seems I have two choices: grow the site or convert it.  Growing it should be simple but, in all my years as a stockbroker and later in asset management sales, I have come to realize I don’t really enjoy sales.  And, of course, devoting time to shameless promotion takes away from charting and writing — which I do enjoy.

    Converting the site would mean setting up a hedge fund.  Several friends have expressed interest in seeding a small fund that would ultimately grow to about $100 million. I would continue to do exactly what I’ve been doing — identifying major and interim tops and bottoms — and execute unleveraged long or short positions in major markets on behalf of the fund.

    It would be run from my small, but lovely town (also an internationally renowned vacation destination) on the Central California coast with an assistant and a trader.   Custody, administration, etc would be handled by name brand entities elsewhere.

    As I envision it, current members would have the option of investing in the fund or continuing to simply receive research until their membership expires. Current members would, of course, have their pebblewriter.com fees applied to fund management fees — which would be discounted for current members who are involved from the start.

    One member has also suggested a chat-room type system whereby fund trades could be communicated in real time to members who want to continue trading their own accounts as well.  I am fine with this idea, as long as we’re not giving away research to our competitors (one of the problems with the current site, where we get 20-30 login attempts daily for every active, paying member.)

    I have a lot of homework yet to do, beginning with a survey of current members I had planned on sending out regardless.  In the next couple of days, I will be seeking your opinion on both the current site and the proposed fund.  There is no fund yet, so I am not soliciting investments at this time; but, it would be very useful to get a sense of members’ potential interest.  Please watch for an email.

    NEW FEE SCHEDULE:

    In the meantime, membership fees for pebblewriter.com are slated to increase on January 1, 2013 (regardless of what happens with the fund, I need to purchase some new computers, backup systems and communications.)  In keeping with my practice of tying fees to performance, the new rates are as follows:

    • Annual:  $950
    • Semi-Annual: $550
    • Quarterly:  $375

    I recognize this is a significant increase, so I am offering existing members the opportunity to lock in current rates through December 31.  Also, as a bonus, the first 15 annual memberships will be granted Charter Membership status.  In other words, your annual rate will never rise above $800 for the life of the site.  As those who joined last Spring for $500 will tell you, that’s pretty cool.

    This offer won’t be opened up to the public until December 26th.  And, as always, if you currently have a membership, we’ll tack your new one on to the end of your current one.  That way, you won’t get stuck with even higher prices when your existing membership expires in a few months.

    Again, if we move forward with the fund, current members will receive a full offset for any pebblewriter.com fees paid from this date forward, and will also receive a meaningful discount on any fund fees charged.  I strongly believe in rewarding those who’ve stood by me on this adventure.

    If you’ve read this far, thanks!  I had no idea when I started pebblewriter last year that it would grow into something so rewarding and enjoyable.  I’ve learned a lot, and I hope most of you have, too.

    *  *  *  *  *  *  *  *

    Christmas Eve is always bittersweet for me.  I love being with family, singing Christmas carols and seeing the excitement on my children’s faces as they rush downstairs to see what Santa brought.  And, it seems most people are just a little bit nicer to one another.  But, it’s also the day when, at age 15, I lost my mother — my one remaining parent.  So, for me, it’s a reminder to reach out to loved ones and tell them how much they mean.

    It’s also a reminder of the importance of helping those who are struggling.  These are challenging times.  If you’re anything like me, the events of the past year have caused you to take stock of the world and your place in it.  Between wars, famine, financial distress, political and religious division and, yes, shootings — we need this holy day now more than ever.  And, regardless of what church, synagogue, temple or mosque we attend, we need to look for opportunities — every day — to minister to those around us.

    My family and I wish you all a Merry Christmas and a blessed New Year.

     

  • Investing and Poker

    Our decision to go long again at 1331 is paying some nice dividends, with SPX up over 30 points in the past two days.  If we can hang on through tomorrow, we should be up over 50% since inception (March 22.)

    A little reminder…  a few days ago I announced a 37% discount to the first 37 new annual members in celebration of our 2nd quarter results (up 37%!)   If you’re already a monthly/quarterly/semi-annual member, we’ll just tack it on the end of your current membership. If you’re already an annual member, tell a friend and earn 3 free months when they sign up.   There are still 11 spots left, so grab ’em while you can.  This deal ends tomorrow, when new rates are announced.  To sign up, click here.

    In my old days on Wall Street, this would be a great time to start indexing.  Institutional asset management is all about beating your benchmarks and quartiles, and every manager I know would absolutely sit on a lead like this and ride out the rest of the year essentially owning the S&P 500.  But, you all know me better than that, right?

    I am an ardent believer in the chart patterns, channels, harmonic patterns and technical analysis that have enabled us to capitalize on rather than fall victim to volatility.  It’s hard work, for sure.  I start around 5:30 am and often nod off around midnight — still charting.

    But, the results are worth the effort.  We certainly won’t be on the right side of every move every time; my goal is to get most of them right by sticking to our proven methodology, and avoid being sucked into positions based on hope or fear.

    One of our members (known here as Beach Justice) is a professional poker player;  he recently offered me the following sage advice:

    There’s a saying in poker: “Don’t be results oriented,” which simply means that just because your play didn’t work out and you lost the hand, that doesn’t mean it was wrong, and thus you shouldn’t bitch about it.  Profitable situations in poker get annihilated by low-percentage cards all the time, but if the expected value of the play was positive, that’s all that matters and the profit will be there over the long run.

    Trading the is the same way, just because a particular forecast doesn’t work out for whatever reason, it doesn’t make the position a bad bet.  If I make 10 trades with an estimated 3:1 risk reward and I get stopped out on all 10 of them, as long as the analysis was good that’s fine.

    Anyway, as simple as that concept is, I never see traders discuss it and just thought it might be helpful in teaching trading.  We’re here to take good gambles (and on pebblewriter.com, learn how to find them) but all a good gamble does is offer an edge, it doesn’t guarantee it will pay off every time.

    Perhaps a blog about something like this will reinforce to any readers (or haters if you somehow have them), that it won’t always work out, and there’s nothing wrong with that.  So just a suggestion in case that’s helpful.

    Thanks, BJ; it’s extremely helpful.  Because, I have no interest in sitting on our lead and/or playing it safe.  God willing, we’ll keep doing what we’re doing and the results will sort themselves out.

    And, thanks to all of you for your emails yesterday.  I will strive to make my posts more succinct for those who want the headlines, and still offer excruciating detail for fellow chart rats.

    More charts coming shortly.

    UPDATE:  3:30 PM

    Not much going on since this morning’s ramp.  Still long, still looking for higher.   Though we tagged the .618 of the most recent dip, so we can expect the usual pull back.  Keep an eye on the 15-min channel for signs of anything more than that.

    I’ve been scanning various indices to see what, if anything, they might have to say — ideally in harmony, if not in unison.

    First, let’s orient ourselves to the longer term channels.  The set shown on the first chart above stem from some pretty authoritative fan lines from the 2007 top and 2009 bottom.

    So, when we chart the various upside targets based on channels and trend lines, they’re not the least bit arbitrary.

    TL 3 is the top fan line off the 2007 top.  TL 2 is parallel to another fan line off the top.  TL 1 is pretty obvious, and has already been broken anyway.  And the purple channel guiding the upside since 1266 is formed by a fan line off the 2009 and another line parallel to it.

    The most likely turning points as we continue upward will be the intersection of these fan lines and key Fibonacci levels — such as the .786 at 1389 and the .886 at 1404.  Remember, 1404 is also the target level of the inverse H&S pattern from June — indicated in white.

    The purple channel itself allows for any of these potential targets, whereas the rising wedge that had been under construction maxed out around 1404.  That wedge still resonates with me, because so many wedges, when they break down, go back and tag the original apex price level.    Here’s what I mean:

    The same thing just happened on DX in a very nice payoff to our call of a top on Tuesday [see: Update on the Dollar.]

    It’s happened so many times to me that I actively look for it now, and I find it interesting that a pretty clean RW can be drawn with a 1404 apex.

    From current prices, the various upside targets represent only a 2.5 – 3.8% increase for SPX.  The other indices are similarly positioned.  NYA, for instance, needs only 3.5% to reach its inverse H&S target, or 4.3% to reach its Fib .786 at 8091.

    DJIA needs 1.3% to reach its .786 and 2.9% for its IH&S target.

    And, RUT is only 6.9% away from its .786 and IH&S target, both of which are at 821.

    Bottom line – not much further to go before it’s do or die time.  I have to run out for a meeting.   I’ll post more later if I can.

     

     

     

     

     

  • 2nd Quarter Results

    Many thanks to everyone who’s been a part of the new pebblewriter.com.

    We just completed our first full calendar quarter.  2Q2012 came in at 37.74% — which would have ranked us #1 among managers if we were an equity mutual fund or (at least, according to one website) a hedge fund.  Now, if we can just repeat that!

    Since the March 22 inception, the numbers are slightly better…

     

    as of July 6, 2012:

    Inception to date:                  +40.47%

    S&P 500:                                – 2.74%

    Performance Differential:      +43.21%

    The Fine Print:

    1. Represents performance of a theoretical portfolio, where SPX is bought at called bottoms and shorted at called tops.  Your mileage will vary.
    2. Assumes 100% long, 100% short or 100% cash (such as when stopped out.)
    3. Prices listed reflect the index at the time tops/bottoms are called and/or trades are made and are believed, but not guaranteed, to be accurate.  Dividends ignored.
    4. MTM = marked to market.
    5. Results are since inception of pebblewriter.com on March 22, 2012.
    6. Past results are not necessarily indicative of future results.  See Disclosures and Use Agreement for important information.